Bitcoin — The Epiphany of Longtermism?
Anyone delving into the study of Bitcoin will eventually come across the concept of time preference. This notion is a profound, almost philosophical, aspect encountered during the journey of self-education about Bitcoin. Which following one of Bitcoin’s idioms,
“You are not changing Bitcoin, Bitcoin will change you!”
encapsulates the transformative impact Bitcoin can have, including altering one’s time preference. With the concept of time preference describing a living being’s universal preference for earlier over later satisfaction, through for example consumption. This usually leads Bitcoiners to value the future more highly than the average pre-coiner (someone who has not yet obtained any bitcoin). This shift is reflected in the economic actions taken by Bitcoiners, who tend to delay consumption and increase their savings rate, allocating more of their resources to obtain more bitcoin. A phenomenon, which on the surface seems to be akin to the philosophical theory and movement of Longtermism, a concept of Effective Altruism (EA).
Definitions
Effective Altruism (EA), is about using evidence and reason to figure out how to benefit others as much as possible, and taking action on that basis (Center for Effective Altruism).
Longtermism, is the view that positively influencing the long-term future of humanity is a key moral priority of our time. Three ideas come together to suggest this view. First, future people matter. Our lives surely matter just as much as those lived thousands of years ago — so why shouldn’t the lives of people living thousands of years from now matter equally? Second, the future could be vast. Absent catastrophe, most people who will ever live have not yet been born. Third, our actions may predictably influence how well this long-term future goes. In sum, it may be our responsibility to ensure future generations get to survive and flourish (Center for Effective Altruism).
This assumed responsibility for future generations is already evident in today’s political agendas and even in judicial considerations. With the Office of the United Nations High Commissioner for Human Rights (OHCHR) stating the following in their Maastricht-Principles-on-The-Human-Rights-of-Future-Generations.
“Future generations must be free from intergenerational discrimination. This discrimination includes but is not limited to:
i. The waste, destruction, or unsustainable use of resources essential to human life;
ii. Shifting the burden of responding to present crises to future generations; and
iii. According less value to future lives and rights than the lives and rights of present generations, including discounting the impacts and burdens of present conduct on the lives and rights of future generations.”
Or the German Ethics Council giving the following opinion on climate justice (Climate Justice — Opinion, p. 14 para. 25).
“For reasons of justice, participation in measures to tackle climate change may be morally required. If one’s own exercise of freedom interferes unjustly with the freedom and well-being of others, including future generations, for example through climate-damaging consumption, the state can intervene by restricting freedom. As long as there is regulatory obligation, it is up to the individual to assume a moral duty to cooperate.”
With many Bitcoiners having a low time preference thus delaying consumption, living a more sustainable less resource intensive life and advocating for change of the current fiat financial system, which is built on credit, the creation of money from nothing, thus fuelling the consumption of resources in the present, which one otherwise would have only had access to in the future through saving, Bitcoiners seem to be aligned in the cause to take responsibility for future generations. The importance of the present over the future and thus the time preference of the current fiat financial system becomes even more apparent when considering that discount rates are a integral part of financial models, attaching less value to for example future profits than present ones, and how this discount rate is not determined by peoples preferences, like suggested by the Austrian School of Economics, but by central banks via their interest rate policies.
Further do many Bitcoiners have the conviction that bitcoin is the last form of money humanity will ever have, while recognizing that the move to global bitcoin standard will most likely be so far into the future, that they self will not live to see it happening. Highlighting the long-term vision many Bitcoiners are having. However, when looking at opinions like restricting the freedom of individuals to protect future generations, this very much stands opposite to the very liberal, freedom orientated, basically anarchistic ideal of Bitcoin, it becomes clear that the whole matter requires more nuance.
This comes from the fact that just like nothing in live is just black and white, the strength of Longtermism varies.
With “Weak Longtermism” being more akin to commons sense in a way that future generations should not suffer from the effects of our current actions, be it climate change, unsustainable debt levels or other matters. With future generations being people born within the next seven generations or around 140 years. A concept originating from the Indigenous North American tribe of the Iroquois.
“Strong Longtermism” however, as laid out by MacAskill and his Oxford colleague Hilary Greaves argue we should be thinking about the consequences of our actions not just seven generations from now, but thousands or even millions of years ahead. This perspective on Longtermism not only adopts a much longer-term outlook but also redefines what constitutes risks from current actions for future generations. Strong Longtermism focuses on existential risks — threats that could wipe out humanity entirely, rather than just making people worse off. Consequently, some proponents of Strong Longtermism do not prioritize climate change today, as it may cause severe harm to people now and in the near future but does not pose an existential threat to humanity as a whole. Further does this interpretation of Longtermism come with even more dangerous ideas, like outlined in “The Vulnerable World Hypothesis” by Nick Bostrom with fantasizing about developments of ubiquitous surveillance systems or by Nicholas Beckstead who in his 2013 PhD dissertation argued that all other things being equal, saving lives in rich countries is more important than saving lives in poor countries as rich countries have substantially more innovation, and their workers are much more economically productive.
With such ideas being associated with “Strong Longtermism” its concept must be rejected strongly and unequivocally. However, the general idea of Longtermism in its weaker form — considering the harm and benefits of today’s actions against their potential future impact — is reasonable. Therefore, I wanted to explore how bitcoin’s adoption fits into this framework.
As in my opinion the adoption of a global bitcoin standard today, setting aside the technical challenges, would harm many people today, as governments and their programs like pensions systems as well as many people themselves are not prepared to act financially responsibly or even have the luxury to do so as they are living pay check to pay check and are dependent on government aid, which is kept running through inflating the fiat money supply. Immediately switching to a bitcoin, a hard/sound money, standard would lead to the collapse of many countries and cause severe harm to many people. A seemingly fitting comparison is that of a drug addict (government) needing their next high (stimulus, through money creation). Immediately denying him access to his drug and forcing him to quit cold turkey will likely result in severe physical reactions, including pain. While there are significant long-term benefits to living a drug-free life, the initial withdrawal process can be extremely challenging and distressing. A more gradual and supportive approach might mitigate these adverse effects and improve his chances of successful recovery. Similarly, the adoption of bitcoin must be seen as holding the potential for a prosperous future, which requires gradual adoption. It empowers individuals towards financial freedom by reducing reliance on government subsidies. bitcoin enables people to preserve and retain their purchasing power, enabling them to take care of themselves and their families during economic shocks such as the 2007/2008 financial crisis or the COVID-19 pandemic. During such crises, when individuals risk losing their income sources, governments resort to intervention and fiscal policies, trying to stabilize the economy by creating demand through money creation. This shortsighted approach stands opposite to Longtermism and neglects long-term consequences, by burdening future generations with the fallout of our present well-intended actions aimed at aiding people.
What bitcoin offers is a bottom-up, grassroots approach, instead of top-down shortsighted interventions, which are based Keynesianism believe that government/central bank intervention and manipulation of demand can cure economic ills. However, those actions are based on incomplete data, as the intricacies of an economy and its complexities are a phenomenon which arises from the interactions of individuals, each acting on their own subjective preferences and knowledge.
Many have probably heard the phrase:
“Bitcoin fixes this!”
A popular phrase in the Bitcoin community, which highlights bitcoin’s broad problem-solving potential. However, it’s crucial to recognize that bitcoin itself, being “just” money, doesn’t directly fix anything. Change comes from the decisions and actions we take. bitcoin, designed to be disinflationary with its block reward halving approximately every four years, incentivizes users to save and enables to planning their economic activities on a solid foundation. Unlike fiat currencies, which constantly inflate at unpredictable rates and erode purchasing power, bitcoin offers a reliable store of value. With its fixed supply limit of 20,999,999.9769 BTC, bitcoin stands apart as a unique asset in a world where virtually everything else can be produced in greater quantities with the allocation of more resources toward its production. This characteristic allows users to avoid the risks of investments in real estate, stocks, or other assets often required to outperform inflation, but their valuation is very much subject to the actions of central authorities’, like interest rate policies from central banks or regulations. bitcoin is the invention of verifiable digital scarcity without counterparty risk, making it the most accurate measure of purchasing power ever created. This reliability enables users to plan their future economic activities with greater certainty and safety. As people become more financially secure and accumulate savings that are not eroded by inflationary policies of central authorities, they will be better equipped to manage economic downturns independently, without the need for government subsidies. This will have far-reaching benefits for society. History has repeatedly shown that economic downturns contribute to rising inequality, resulting in a loss of hope for a better future for large segments of the population. This creates fertile ground for extremist politicians to polarize society, driving protectionism and nationalism. While the Left calls for socialism and wealth redistribution, and the Right blames immigrants, bitcoin offers a unique alternative. By providing a stable store of value and financial independence, bitcoin can help mitigate the economic instability that fuels such divisive rhetoric.
As people see their bitcoin gain purchasing power, their time preference shifts towards the future. Consequently, companies must innovate and improve their products to incentivize spending, knowing that customers value their increasing purchasing power. bitcoin users, seeking durable products, push companies to produce higher quality items that last longer, ultimately preserving resources over the long-term.
In conclusion, the transformative power of bitcoin lies not only in its potential as a decentralized currency but also in its profound impact on the time preferences and economic behaviours of individuals. By encouraging a lower time preference, Bitcoiners naturally align themselves with principles akin to “Weak Longtermism”, valuing sustainable living and future-oriented decision-making. Without the need to protect the climate by outlawing activities or restricting freedom, Bitcoiners are intrinsically motivated to do so. While the immediate transition to a bitcoin standard could pose significant challenges, particularly for those dependent on the current fiat systems, a gradual and mindful adoption would foster a more resilient and forward-thinking society.
Thank you for reading my article, which is part of the Bitcoin Talents program at the Frankfurt School of Finance.
I welcome your thoughtful contributions and invite you to share your comments or connect with me on LinkedIn.
Additional Resources
Why longtermism is the world’s most dangerous secular credo | Aeon Essays
What is longtermism? The controversial idea, explained — Vox
Longtermism: what is it and why do its critics think it is dangerous? | New Scientist
The Case for Strong Longtermism — GPI Working Paper June 2021 (2) (globalprioritiesinstitute.org
Note: The content of this article represents my personal views, thoughts and opinions an does not necessarily represent the position of EY.
